No U.S.-style housing collapse in Canada: RBC

December 8, 2008 at 6:31 AM EST

TORONTO — Canada's housing sector is entering what RBC Economics calls a “cyclical downtown,” but says the risk of a U.S.-style meltdown is remote.

RBC senior economist Robert Hogue says many factors that triggered the U.S. housing collapse are either absent or of much lower significance in Canada.

He says the housing market is expected to hold up even as a sluggish economy threatens income growth and erodes consumer confidence.

Mr. Hogue says the sub-prime business remains marginal, banks are stable and households are generally not overstretched financially.

He also says speculation in the housing market is more subdued and these factors should prevent housing markets from “spiralling down even as the Canadian economy slips into recession.”

The RBC affordability index shows a standard condo to be the most affordable housing in Canada, requiring 31.4 per cent of pre-tax income. A standard townhouse is next at 36.9 per cent, followed by a detached bungalow at 45.7 per cent and a standard two-storey home at 52 per cent.